Dairylea Proposes Merger with DFA

Dairylea’s members will be asked to vote on the proposal during a special meeting in February.

by Jim Dickrell

In a conference call this afternoon, Dairylea and Dairy Farmers of America (DFA) executives said the proposed merger of the two co-ops is more about expanding marketing opportunities both here in the United States and internationally.

There are few projected cost savings since the two co-ops already work closely together, says Greg Wickham, Dairylea CEO. No employees will be laid off, and if anything, more employees coould be added as the merged co-op expands service, he says.

The Dairylea name will be subsumed as a brand name, with Dairy Farmers of America becoming the name of the new combined cooperative.

The merger must be approved by approximately 1,200 current Dairylea members, but will only require a corporate DFA board vote.

Rick Smith, DFA CEO, says he does not believe the merger is so large that it requires official U.S. Department of Justice notification. "But we will comply with the spirit of such a filing," he said.

The merger also does not impact a current lawsuit against Dairy Marketing Services, a marketing cooperative in the northeast. DMS is comprised of DFA, Dairylea and St. Albans Cooperative in Vertmont.

The full text of the news release can be found below.

Source: Dairylea Cooperative, Inc.

Dairylea Cooperative, Inc.’s Board of Directors has voted to merge with Dairy Farmers of America (DFA). The merger proposal, presented to members at Dairylea’s Annual Meeting today, reflects a desire to position Dairylea for the future amid rapidly evolving market dynamics. DFA’s Board of Directors has endorsed the merger, which requires approval by Dairylea’s members, who will be asked to vote during a special meeting in February 2014.

Dairylea’s farmer Board of Directors spent the past three years in a comprehensive examination of how to best position Dairylea’s members for the future. This effort involved soliciting member input and guidance from the "2020 Group," a committee formed in 2010 to gather ideas on generating value beyond the traditional cooperative structure. Among many topics, the group explored how to create market opportunities for its members that peer cooperatives with investments in processing are attaining.

"Ultimately, the Board determined merging with DFA, already a longtime partner in Dairy Marketing Services, would best complement Dairylea’s capabilities and resources, while securing flexibility and increasing value for our members," Wickham said.

Since 2002, Dairylea has been a member cooperative of DFA, a national cooperative with a global footprint and expanding commercial investments in processing built around the same core values as Dairylea. The proposed merger will provide Dairylea members access to growing national and international milk markets, ongoing patronage dividends, tax benefits and other opportunities. Additionally, Dairylea members will become owners of — and enjoy the value-added returns from — the products, plants and partners that comprise DFA’s commercial division.

Conversely, the merger provides DFA members with long-standing customer relationships in the Northeast marketplace, enhanced Farm Services and expanded access to capital to facilitate strategic growth.

"In many ways, a merger with DFA is simply a continuation of the working relationship that Dairylea has forged with DFA during the past 12 years," said Rick Smith, DFA president and chief executive officer.

Working together, Dairylea and DFA have created efficiencies in milk assembly, transportation and marketing, as well as joint management of Farm Services and membership operations in the Northeast. These cost-efficiencies are expected to continue and grow following the merger.

Six seats will be added to DFA’s Board of Directors to represent expanded membership in the Northeast, and DFA’s Northeast Area Council will maintain local governance and a grassroots structure familiar to Dairylea members.

Prior to the vote in February 2014, a series of informational sessions will be held to provide Dairylea members with a comprehensive overview of the proposed merger, a more detailed explanation of the voting process and the chance to have their questions answered.